CFTC extends UMR relief to ease pandemic disruption
19 March 2020 Washington DC
Image: Shutterstock
The US Commodity Futures Trading Commission (CFTC) has voted unanimously to finalise a one-year extension of the initial margin compliance deadline for market participants with the smallest uncleared swaps portfolios.
“There is universal agreement that this extension will mitigate rather than exacerbate risk,” says CFTC chairman Heath Tarbert.
The action by the CFTC comes in response to the fact that many firms’ resources are being redirected to dealing with the ever-expanding coronavirus outbreak.
The pandemic is posing great challenges for organisations and the extension is aimed at giving many buy-side market participants the necessary time to put required custodial arrangements and documentation in place, says Tarbert.
Currently, the CFTC’s initial margin requirements apply to the biggest 40 swap dealers, thereby covering approximately 97 percent of the US portion of this global market.
“Approval of this rule is also one of nearly a dozen concrete actions the CFTC and its staff will have taken by week’s end to address the spread of the coronavirus and its effect on financial markets,” says Tarbert.
“Market participants must be committed to following the rules, the CFTC is committed to providing targeted relief where necessary during this historic period of market volatility and uncertainty,” he adds.
Commenting on the reprive, Shaun Murray, managing director and CEO of Margin Reform, say: “While this is excellent news for the industry, the assumption has been that it was baked-in since the proposal in October 2019, so this isn’t a surprising ratification.”
Murray also highlights that the announcement linked the extension to one of the recently issued CFTC objectives to deal with coronavirus, (phase three: responding swiftly to changing conditions with practical, targeted relief).
“The chairman goes on to support this for UMR purposes, which in Margin Reform’s view is positive in that the guidance is unambiguous,” he adds.
“There is universal agreement that this extension will mitigate rather than exacerbate risk,” says CFTC chairman Heath Tarbert.
The action by the CFTC comes in response to the fact that many firms’ resources are being redirected to dealing with the ever-expanding coronavirus outbreak.
The pandemic is posing great challenges for organisations and the extension is aimed at giving many buy-side market participants the necessary time to put required custodial arrangements and documentation in place, says Tarbert.
Currently, the CFTC’s initial margin requirements apply to the biggest 40 swap dealers, thereby covering approximately 97 percent of the US portion of this global market.
“Approval of this rule is also one of nearly a dozen concrete actions the CFTC and its staff will have taken by week’s end to address the spread of the coronavirus and its effect on financial markets,” says Tarbert.
“Market participants must be committed to following the rules, the CFTC is committed to providing targeted relief where necessary during this historic period of market volatility and uncertainty,” he adds.
Commenting on the reprive, Shaun Murray, managing director and CEO of Margin Reform, say: “While this is excellent news for the industry, the assumption has been that it was baked-in since the proposal in October 2019, so this isn’t a surprising ratification.”
Murray also highlights that the announcement linked the extension to one of the recently issued CFTC objectives to deal with coronavirus, (phase three: responding swiftly to changing conditions with practical, targeted relief).
“The chairman goes on to support this for UMR purposes, which in Margin Reform’s view is positive in that the guidance is unambiguous,” he adds.
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